[Click eStock] "KT Achieves 500 Billion Operating Profit in 10 Years... Now Is the Cheapest"

[Asia Economy Reporter Myung-Hwan Lee] Daishin Securities announced on the 11th that it maintains a buy rating on KT and raises the target price by 13% from the previous 46,000 KRW to 52,000 KRW.

Daishin Securities forecasts KT's consolidated sales for the first quarter of this year to increase by 6% year-on-year to 6.4 trillion KRW, and operating profit to rise by 20% year-on-year to 530 billion KRW. On a separate basis, sales are expected to increase by 2.7% from last year to 4.7 trillion KRW, and operating profit is projected to grow by 18% to 430 billion KRW. Both consolidated and separate bases are predicted to record the highest performance since the first quarter of 2012. Marketing expenses are analyzed to be controlled at around 16% of sales due to market stabilization.

Daishin Securities analyzed that KT's wireless division is performing well. The average revenue per user (ARPU) for the wireless division in the first quarter is expected to be 32,800 KRW, an increase of 2.4% compared to the same period last year. As of February, the 5G penetration rate was 47.9%, maintaining the number one position for 20 consecutive months. The mobile partnership with Disney's online video service (OTT) platform 'Disney+' since November last year is also said to have contributed to the ARPU increase.

It was also explained that selling expenses decreased. Selling expenses for the first quarter of this year are expected to be 630 billion KRW, down 7% from the previous quarter. The proportion of selling expenses to sales is analyzed by Daishin Securities to be 16%, lower than the average of 16.4% since the introduction of 5G. Frequency amortization costs are also expected to decrease. The LTE frequency, whose usage period expired last year, is about to be reassigned, and due to the introduction of 5G reducing LTE demand, frequency costs are expected to be reassigned at a lower level than before. The amortization cost reduction compared to last year is estimated at 50 billion KRW.

Researcher Kim Hoe-Jae of Daishin Securities said, "Despite the stock price increase, the improvement in performance is significant, so the current price-to-earnings ratio (PER) is only 9.3 times," and added, "The corporate value will continue to rise during the process of pursuing initial public offerings (IPOs) of subsidiaries including K-Bank."